Technology with Loss Mitigation Uses Ramps Up
Houston-Andrew Dubinsky, president and CEO of Encomia, a provider of e-lending software solutions, is seeing more lenders use technology for loss mitigation, specifically around the adoption of electronic modifications or at the very least, getting approval from the borrower electronically to do modifications.
"That's obviously a big win because from a customer standpoint. It's nice having a person on the telephone when you are on the Web and you can see the modification documentation right there in front of you," said Mr. Dubinsky.
"You can talk about it and get the modification done, whereas today what happens is a lot of times the lender sends the paperwork out or the servicer sends the paperwork out and it just never gets done. The borrower wants to do it. They are already under a lot of stress."
Right now, he says, a lot of companies can send out modification packages electronically. "Click here and download it. That's no big deal," he says.
"It's electronically signing it and getting it back that closes the loop effectively. For the bank and from a customer standpoint, having a single location to go and sign documents on the Web is a big win. It's a win in terms of being a faster, more customer-centric process."
Today underwriting standards have gone up for all different types of products. Servicers and lenders are doing more due diligence in terms of income verification, he said. Mr. Dubinsky believes there is a big success story around banks that already have an existing relationship with their customer.
"They are already authorized. They know who the borrower is. This isn't a question of identifying them. Is it really John Smith coming to the website? Yes, he has been logging on from his house on Comcast Cable for three years. We know it's him."
Currently, 75% of modifications do not get done, Mr. Dubinsky stressed. "Let's get them done first, to where we are completing 75% and then let's judge if they are working or not. Right now the number of packages that they complete is so small in relative terms compared to the problem. A hundred people are coming in that want a modification and 25 leave with the modification. Then you judge that 25%, does it work or does it not? To me, that's not a realistic statistic. Let's get the 100 out of a 100 that need a modification and have asked for it."
One of his customers says 30% to 40% of the calls at their center are directly related to: "Where are my documents? Did you get them? Where are they at in the process?" For companies that are tracking call volume and the nature of calls, if they want to reduce the calls the best way to do that is to make the information available online. That's going to help their call center volume. And really, where they are behind the curve is in the call center volume," he said.
Everyone wants to be a team player these days, and no one is openly resisting the quest to conduct more loss mitigation. "The trick is that none of the servicers were geared to do this in any way, shape or form. It's like buying a car with four gears. It's like driving on the freeway in reverse. It's just not made to do that. The system wasn't designed to handle this level of modifications and loss mitigation. So, the best thing we can do is apply technology to fix this as quickly as possible so we don't have to go through all sorts of crazy staffing up, the additional space, and putting in new phone systems."
At this point there is a lot of big bank activity. Mr. Dubinsky's take is that they are in this scenario where now that they have money and they control 80% to 85% of the market. "They are gearing up to stomp on the little guy," he added.
"I think that the big guys are getting serious. They are getting more competitive. Before, the little guys could run laps around the big guys on service, etc. Now, the big guys are using technology to try and catch up with the little guys."